- Crypto has had a tough year, but there are still good reasons to invest
- A long-term outlook can make it easier to tolerate volatility
- However, there’s one important reason you may want to avoid crypto for now
The past year has been especially volatile for crypto, as prices reached both record highs and sinking lows. With the stock market on shaky ground and a recession possibly looming, it also doesn’t appear that this volatility will end anytime soon.
That said, despite the ups and downs, right now can be a smart opportunity to invest in crypto. If you’ve been on the fence about investing, there are two good reasons to consider buying now — and one reason to avoid crypto completely.
Why you may want to invest right now
- It’s an affordable time to buy
When the market is in a slump and cryptocurrency prices are dropping quickly, it may seem like the worst time to invest. However, downturns can actually be one of the most affordable times to buy.
Crypto is a notoriously expensive investment. At its peak, Bitcoin (BTC 6.14%) was priced at nearly $70,000 per token. Ethereum (ETH 11.38%) cost roughly $4,800 per token. Currently, though, they are priced at $24,000 and $1,700 per token, respectively.
If you’ve ever considered buying cryptocurrency, now could be the time to do it. Prices are down significantly from their all-time highs, and if they get anywhere close to those peaks again, you could potentially make a lot of money by investing now.
- Crypto is a long-term investment
Crypto is extremely volatile at times, and the downturns can be tough to stomach. However, an investment’s long-term performance is more important than its short-term ups and downs.
Historically, those who have stayed invested for the long haul have seen significant rewards. For example, despite its price falling by more than 50% since the beginning of the year, Bitcoin is still up roughly 576% over the past five years.
Of course, nobody knows for certain whether crypto will succeed over time. But if it does, you could potentially see substantial returns by investing now and holding those investments for the long term.
When it’s better to steer clear
- You’re a risk-averse investor
Cryptocurrency can be a potentially lucrative investment, but it’s not right for everyone. Because the entire sector is still speculative right now, it can be incredibly risky — and there’s always a chance you could lose all the money you invest.
It may be tough to afford that kind of risk, especially if money is tight. If you only have a small amount of cash to invest, it may be wise to focus on stocks, index funds, ETFs, or other “safer” investments before you buy crypto.
Even if you can swing it, not everyone wants to take on a high-risk investment, and that’s OK. Everyone’s investing preferences are different. If you know you’d lose sleep over the constant ups and downs, it may not be the best fit for your portfolio.
Crypto is a volatile investment, but patience can pay off over time. While it’s not right for everyone, if you’re willing to take on more risk for potentially lucrative rewards, now could be a prime opportunity to invest.
This article originally appeared in The Motley Fool.
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